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Saudi Arabia, the world's largest exporter of crude oil, has been reducing its production and deliveries for nearly two years in line with the OPEC agreement, which, being the largest oil producer in the cartel, has objective to set an example.
The Saudis have limited their exports this year – less than 7 million bpd / d in recent months – to prevent a further oversupply of oil from again weighing on oil prices.
Saudi Arabia, despite declining exports, has significantly reshaped the priority destinations of its crude oil exports, boosting sales of the world's largest oil importer – China – and significantly reducing shipments to the United States , vessel tracking data, Chinese customs data, etc. The estimates of the EIA show.
With the volume of export and reshuffle of the destination, the Saudis are looking to kill two birds with one stone. One of the objectives is to reduce oil exports to the most transparent US market, the short-term goal of bringing global stocks back to adequate average levels, rebalancing the market and, hence, hope for Saudis, to support oil prices.
The other, longer-term goal is to boost oil sales in China, which is not only the largest oil importer in the world, but also one of the notoriously opaque markets for oil inventory reporting.
While OPEC, EIA and market players review US and OECD oil inventory reports and data, the oil market can not rely on China for transparent data communication Chinese inventory.
Saudi Arabia Drives the Most Transparent Market, Conquering Greater Market Share in China, Also Taking Advantage of US Sanctions to Iran to Boost Saudi Oil Sales to World's Largest Importer crude oil. Related: the corn industry battered by the shocking decision of ethanol
The shift of Saudi exports to the United States and China is also partly due to long-term structural changes: increased oil production in the United States, lower US imports and continued growth in oil demand in China said the EIA in an analysis last month.
In recent months, however, it has become clear that Saudi oil sales in the United States have dropped significantly. The EIA's weekly assessment of US imports from Saudi Arabia shows that the United States is currently importing Saudi oil at the lowest level since 2010.
US oil imports in July 2019 fell 62% from August 2018 to 262,053 b / d, according to CNBC quoted TankerTrackers.com as saying. At the same time, TankerTrackers.com estimates Saudi exports to China at just over 1.8 million bpd, nearly double the Saudi sales to China in August 2018.
This estimate is just below the record 1.89 million barrels per day of Chinese oil imports from Saudi Arabia, which jumped 64 percent from May and broke last March's record.
Petroleum tracking data compiled by Bloomberg revealed 1.74 million bpd observed Saudi exports to China in July, while shipments observed to the United States appeared to be only 161,000 bpd – the lowest since Bloomberg began tracking tanker shipments in January 2017. Related: Trump, OPEC jaw oil in opposite directions
While Saudi Arabia is reducing its exports to the United States, it is seeking to establish long-term relations in the Asian oil market and block future oil demand in the region, which is expected to post the only solid growth in demand in the coming years. decades.
Earlier this year, Saudi Arabia's oil giant, Saudi Aramco, signed a joint venture agreement for a fully integrated US $ 10 billion refining and petrochemical complex that will be supplied with oil delivered by Saudi Arabia. This is one of Aramco's recent contracts in China and India to hold downstream interests in Asia, bound by long-term crude supply commitments.
It is therefore not surprising that Saudi Arabia is seeking to capitalize on the current absence of the Iranian rival in the Asian oil market by increasing sales to China. This long-term Saudi movement is detrimental to exports to the West, particularly to the United States, in the short term. Given the current state of the oil market, oil prices and oil stocks in the countries that account for it in a transparent manner, Saudi Arabia is currently trying to eliminate the overabundance while laying the foundation for increasing its shares. market in Asia and China.
By Tsvetana Paraskova for Oilprice.com
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